PREFACE
Aaron Gordon is fellow Active Rain member and a loan officer with Maverick Residential Mortgage Co. in Las Vegas. He's makes about one hundred, fifty loans a year and he has a newsletter that has a subscription list of more than ten thousand. Here's where you can read his stuff on Active Rain http://activerain.com/agordon
Aaron wrote a very interesting responseto a blog I recently posted on Active Rain about foreclosures and how the mortgage lenders might be able to keep many of them from occuring.
I think that what Aaron wrote should be out there for all to see.
Hopefully the lenders will get on the train to resolution before it's too late. Here's Gordon's note. Mine follows his, and we would both like for you to post your comments here as well. Maybe those making the decisions will read what we all have to say:
THE COMMENTS
Bill---I think you have the right idea but I think the real solution is much more than just a one year moratorium. One year is only delaying the inevitable. I believe this mess is going to last much longer than that. The majority of ARMs haven't even recasted yet.
The only solution, in my opinion, is note modification. You re-work all of the distressed loans to 40 year terms, letting them keep their current rate for at least three to five years and then it can start SLOWLY adjusting yearly.
Note modification is the hot topic at all of these banks right now. However, they are holding back on rolling this out currently because many of the packaged loans they sold in bulk to large institutional investors don't allow for note modifications.
Opponents of note modification point out that the average borrower who had his note modified in the past, still was late on his mortgage. However, we are getting to a point where some variation of this may be the only viable option.
Aaron --- You are much more adroit in this part of real estate than I am, so I bow to your ideas as better than mine. And I surely appreciate your taking the time to write your comments for us all to read and think about.
If we know that the average person sells his home and moves every seven years, why would lenders rather put their ARM borrowers and their (the lender's) investments into jeopardy -- a jeopardy that on the front end everyone knows they can't manage or recover from -- when by leaving the rates as they are, there will be relatively few losses and the lender and his customers will have resolution within a couple of years?
The main rule of argumentation and debate is this: "Is there a need for a change?" If you can't convince the jury or judges that you have a solution that is better than the status quo, the status quo wins by default. But if your solution is better than the status quo, the status quo proponents crash and burn.
Why is it difficult for lenders/mortgage loan investors to see that the status quo -- following the terms of the ARM mortgages as written -- is going to result in huge red ink loses, and that only their hard headedness will be able to be blamed for it? Is it that they are so arrogant that they are saying, "It's our money and you're going to do it our way, by God, or you can just take the punishment dealt by foreclosure and deficiency judgments"?
I hope they come around to endorsing your solution or some reasonable hybrid of it. It would definitely, in my judgment, do a great deal to stabilize the economy.
After all, these are loans that, quite frankly, should have never been written -- especially when the outcome was totally predictable.
